Rebalancing Your Portfolio: When and Why to Reset Your Investments

When you buy stocks, bonds, or ETFs, you set a target for how much of your money goes where—say, 60% stocks, 40% bonds. But markets don’t stay still. When one asset climbs faster than the others, your original plan gets thrown off. That’s where rebalancing, the process of resetting your portfolio back to its target mix. Also known as portfolio rebalancing, it’s not about predicting the next big move—it’s about sticking to your plan when emotions try to pull you off course.

Think of it like tuning a guitar. Even the best strings go out of tune over time. You don’t need to buy new strings—you just adjust them. Same with your investments. If your stocks surge and now make up 75% of your portfolio instead of 60%, you’re taking on more risk than you planned. Rebalancing means selling some of what’s grown too big and buying more of what’s fallen behind. It’s automatic for many robo-advisors, digital platforms that use algorithms to manage portfolios with minimal human input. Also known as automated investing, they handle this quietly, often quarterly or when allocations drift by 5% or more. But if you manage your own money, you need to check in. You don’t need to do it every month. Most people do it once a year, or when their mix shifts by 10%. Too often, people wait until a crash to act—and that’s too late.

Rebalancing isn’t just about risk control. It forces you to sell high and buy low without trying to time the market. When tech stocks run wild, you sell some and move cash into underperforming areas like bonds or international shares. That’s the opposite of chasing performance. It’s discipline disguised as math. And it works. Studies show portfolios that are regularly rebalanced outperform those that aren’t—especially over 10-year periods. You don’t need fancy tools. Most brokerages let you schedule automatic rebalancing. Or you can do it manually with a simple checklist: check your current allocation, compare it to your target, and trade the difference.

It’s not glamorous. No one cheers when their portfolio gets rebalanced. But it’s one of the few investing habits that actually improves outcomes without adding risk. Whether you use a robo-advisor, manage your own assets, or work with a financial advisor, rebalancing is the quiet engine behind long-term success. Below, you’ll find real examples of how people use it—what goes wrong when they skip it, how it pairs with tax-loss harvesting, and why even small adjustments make a big difference over time.